Outside directorships and corporate performance

Abstract

This paper examines the relation between a company's performance and its top executives' service on other boards of directors. Using dividend cuts to measure performance, we find that top executives of companies that reduce their dividends are approximately 50% less likely to receive additional outside directorships than are top executives of companies that do not reduce their dividends (significant at 1% level). The probability that top executives will resign from or lose outside directorships they already hold is negatively, but not significantly, related to the performance of their own firms.